Banks Working On Linking Up Their Payment Systems To Make Person-To-Person Mobile Transfers Easier

The way younger generations are glued to their smartphones, there’s almost nothing they can’t do with the swipe of a touch screen. Old-fashioned things like writing checks or even paying a roommate with cash is such a bother to some, but yet transferring money to other people with apps hasn’t really caught on like the banking industry figured it would. That’s why the nation’s big four are discussing how they can link up their payment systems to make it easier for consumers to send money via mobile devices or even emails.

Why would banks want to make it easier for us to pay each other? Perhaps because eventually, after we’re all hooked on mobile transfers, they could charge a small fee per transaction, notes Reuters.

The first step involves getting all the banks on the same playing field. Right now, JPMorgan Chase, Bank of America and Wells Fargo are already cool with operating on a system called clearXchange. The remaining Big Four bank Citigroup has teamed up with 1,400 smaller banks on the Popmoney system.

If those two systems were to get together and create a vast network of customers, the idea is it would be easier for those customers to pay each other with the click of a button or a tap of the tablet screen.

While the talks are still basically under wraps, a JPMorgan executive who is also a board member of clearXchange said it makes sense to link the two systems up. That could happen within 18 months.

“We want to make moving money to people with other banks really seamless,” he said.

Even as we use our phones and mobile devices for just about anything including ordering groceries or broadcasting to the world what we’re debating having for lunch, consumers haven’t really latched on to electronic payments between themselves, say industry experts. Only 6% of around $900 billion total person-to-person payments will be made with computers and smart phones this year, said one research group. Everything else is paper money or checks.

The next steps will involve the banks figuring out how to make sure the links between the payment systems are totally fool-proof, as well as ensuring that the payment process would be a lot quicker than the current technology allows.

If it’s easy, safe and fast and doesn’t involve going to an ATM or running up a tab with that friend who always ends up paying for stuff just because it’s easy and says hey you can pay me later, consumers might be convinced to ditch cash and checks. But then again, there are no fees involved in handing your pal a wad of green. Chew on that, banks.

I’ve used this with Wells Fargo for a long time, I don’t remember how long. It used to only be other WF customers, but for a while it’s been customers of any bank. And there is no fee to either customer; there is a limit on the amount per day. My siblings and I use it often – there’s always someone who needs cash fast and we don’t need to pay the fees to Western Union or fedwire fees at the bank.

I don’t feel safe using my smartphone to xfer money (or access my bank accounts at all), so I use this. What I find interesting is how many people don’t know their account number. So many try to give me their ATM/debit card number. They also don’t seem to know the routing number.

Nope, the US system is still the most advanced and the EU model is based on the US Federal Reserve system. While the EU IBAN number can be expanded to be used worldwide, the US ABA system is still more efficient.

The system’s roots go back to 1910, but a quick search didn’t give me the date that most banks started using MICR to encode on all the checks to facilitate the check clearing. The US gov’t use of direct deposit for wages and social security in 1976 started the decline of the check in the USA. I’ve had checking accounts from 1985 and I’ve used less than 200 checks.

There was a major change in check processing in the US starting in 2003 that allows checks to be cleared with electronic images instead of presenting the original to the branch of account. This is what allows people to deposit checks via smartphone, without the legal changes afforded by Check 21. The US gov’t will cease using paper checks by March 31, 2013, all recipients will receive payment via electronic methods; direct deposit, debit card etc. It’s taken so long because so many people insist on using paper checks.